Contributions must have been made for at least 12 months.

Transcription

1 GERMANY 1. Overview of the system Unemployment insurance and unemployment assistance benefits are related to previous income levels and are augmented when there are dependent children. Social assistance guarantees a minimum income level. Family benefits are income tested. Families and individuals with high rents and low incomes may receive housing benefits, remaining rent payments can be fully covered by social assistance. The tax unit is the couple. The 1995 APW earnings level is DM Unemployment insurance 2.1 Conditions for receipt Claimants have to be between 18 and 65 years of age and have to be registered unemployed looking and available for work. Unemployment insurance is compulsory Employment conditions A claimant must have worked at least 360 calendar days in the last 3 years to be eligible Contribution conditions Contributions must have been made for at least 12 months. 2.2 Calculation of benefit amount Calculation of gross benefit The benefit is paid to the individual. The replacement rate depends on family status. The standard rates are 60 per cent of their previous earnings net of tax, and 67 per cent for a worker who receives tax allowance for at least one dependent child. The monthly ceilings are 60 per cent and 67 per cent of DM respectively. The day-to-day administration is based on applicants before tax incomes using simplified income tax assumptions. Benefits are calculated as if all workers are paying church tax (which is not the case) and possible 13th month salary payments are not included in the reference earnings. OECD calculations define net income as gross earnings minus income tax, 1

2 minus deductible social security contributions minus the tax allowance for work-related expenses (see ) Income and earnings disregards 50 per cent of the supplementary income from part-time employment or self-employment is deducted from unemployment insurance benefits if it exceeds DM 30/week, net of income tax, social security contributions and work related expenses. Working more than 18 hours a week ends all entitlements. If the remaining UI benefit, together with the net earned income exceed 80 per cent of the net reference income, the supplementary income will be fully deducted from the UI benefit. 2.3 Tax treatment of benefit Unemployment insurance pays a net benefit: it is not taxable. 2.4 Benefit duration There is no waiting period. The duration of payment depends on age and employment record according to the following table. Benefits are paid 6 days per week. Contribution period Employment period Benefit payment duration (weekdays exc. Sundays) varying with age (days) (years) under 42 over 42 over 44 over 49 over Treatment of particular groups Young persons No special treatment Older workers Unemployed people may qualify for retirement at 60 years provided the recipient has a 96 months employment record or alternatively has been unemployed for 12 months. Benefits are 2

3 often supplemented by the employer to 100 per cent of the former salary. Women have right to a full pensions at 60 after 15 years work. Anyone who has contributed for at least 35 years to a pension fund can retire before normal pension age. 3. Unemployment assistance 3.1 Conditions for receipt Claimants have to be between 18 and 65 years of age and have to be registered unemployed looking for work and available for work Employment conditions Persons who remain unemployed after exhaustion of their insurance benefits are transferred to unemployment assistance. Otherwise, a claimant must have worked at least 6 months in the last calendar years to be eligible to unemployment assistance. 3.2 Calculation of benefit amount Calculation of gross benefit The benefit is paid to the individual and the replacement rate depends on family status. The standard rates are 53 per cent of the previous earnings net of tax, and 57 per cent for a worker who receives a tax allowance for at least one dependent child. The monthly ceilings are 53 per cent and 57 per cent of DM respectively. The day-to-day administration is based on applicants before tax incomes using simplified income tax assumptions. Benefits are calculated as if all workers are paying church tax (which is not the case) and possible 13th month salary payments are not included in the reference earnings. OECD calculations define net income as gross earnings minus income tax, minus deductible social security contributions minus the tax allowance for work-related expenses (see ) Income and earnings disregards Unemployment assistance (UA) benefit is income-tested using income from all sources; family, housing and child-care benefits are excluded from the income test. The spouse s income disregard amounts to the UA-benefit the spouse would receive in case of unemployment or to the basic deduction allowed for income taxation, whichever is higher (the applicant s benefit is reduced by (100-53)=47 per cent of the spouse s net income exceeding DM per year). 3.3 Tax treatment of benefit Unemployment assistance is a net benefit: it is not taxable. 3

4 3.4 Benefit duration There is no waiting period. The duration of payment is indefinite. Benefits are paid 6 days per week. 3.5 Treatment of particular groups Young persons No special treatment Older workers See Section Social assistance Two forms of social assistance exist: assistance with the cost of living and assistance in special circumstances. Only the former is considered. 4.1 Conditions for receipt Anyone has a legal right to social assistance; it is paid to anyone in need (irrespective of age or nationality). 4.2 Calculation of benefit amount Calculation of gross benefit SA is regulated and administered by the Länder; the decision to grant assistance and how much can differ regionally. The basic average rate is DM 590 per month supplemented with 80 per cent of this amount for the spouse. The supplements for children are age related. For each dependent child under 7 years old, 50 per cent of the basic amount can be added to the maximum payment, 65 per cent for each dependent child from 7 to 13 years of age, 90 per cent for children from 13 to 17 years of age and 80 per cent for children over 17 years of age. Lone parents receive supplements (see Section 9). Reasonable housing costs in excess of the earnings-related housing benefit are covered fully Income and earnings disregards All net earned income exceeding DM 250 per month, plus all income from other sources, result in (pre-tax) social assistance being reduced by an equivalent amount. Family, housing and child-care benefits are excluded from the income test. 4

5 4.3 Tax treatment of benefit Not taxable. 4.4 Benefit duration Indefinite. 4.5 Treatment of particular groups Young persons There is no special treatment Older workers There is no special treatment. 5. Housing benefits 5.1 Conditions for receipt Anyone with low income and high rent may be eligible. 5.2 Calculation of benefit amount Housing benefits are calculated as the difference between the subsidisable rent and an own payment. The calculation of the own payment involves several steps and depends on many parameters Calculation of gross benefit The amount of housing benefit covers the gap between the eligible rent and the amount which the household is expected to contribute toward rent. The level of the eligible rent is higher when dependants are present in the household. The household s own contribution toward rent is a function of the gross household income. The calculation is written out in formula form in the technical appendix Income and earnings disregards tests. The benefit is based on an assessable earnings definition. There are no additional income 5

6 5.3 Tax treatment of benefit Not taxable. 5.4 Treatment of particular groups None. 6. Family benefits 6.1 Conditions for receipt Family benefits are paid only to families with dependent children. Each child aged between 0 and 16 qualifies. 6.2 Calculation of benefit amount Calculation of gross benefit The yearly amounts are: DM 840 a year for the first child; DM a year for the second child; DM a year for the third child; DM a year for the fourth and subsequent child; non-taxpayers receive an additional DM 780 per child Income and earnings disregards If the net income exceeds certain ceilings the cash transfers for the second and third children are cut by 50 per cent of the net income in excess of the ceiling. The transfer payments cannot be reduced further than to DM 840 for the second child and to DM for the third and subsequent children. Net income is defined as gross family earnings minus income tax, minus deductible social security contributions minus the tax allowance for work-related expenses, plus the family total of unemployment insurance and assistance benefits. The net income ceilings amount to: DM for a single person; DM for a couple; plus DM per child. 6

7 6.3 Tax treatment of benefit Family benefits are not taxable. 6.4 Treatment of particular groups None. 7. Child-care benefits Child-care can be covered by social assistance. 8. Employment-conditional benefits Benefits specifically targeted to people in work, do not exist; nor are there any income disregards in the social assistance means test. 9. Lone-parent benefits The SA supplement for children is higher for lone parents than for other families. The first child under 7 receives 55 per cent instead of 50 per cent of the basic amount (DM 590 per month); families with at least one child under 7 or at least two children under 16 receive 40 per cent more than the basic amount; families with four or more children under 16 receive 60 per cent more than the basic amount. 10. Tax system 10.1 Income tax rate schedule Tax allowances and credits Six different general tax allowances exist apart from the zero rate bracket: child tax allowance per dependent child: DM 4 104; lone parent allowance: DM per dependent child; lone parents extra allowance (Haushaltfreibetrag): DM 5 616; work related tax allowance, fixed for all earnings levels: DM 2 000; tax allowances for social security contributions: the calculation proceeds in three steps: a) DM 6 000/ (single/couple) are deductible, lowered by 16 per cent of the gross wage (to correct for employer s contributions); 7

8 b) social security contributions exceeding those amounts are deductible up to DM 2 610/5 220 (single/couple); c) of the still remaining expenses in excess of DM2 610/5 220 (single/couple) are deductible up to DM 1 305/2 610 (single/couple); church tax is completely deductible The definition of taxable income Taxable income is defined as the total gross earned income of both spouses minus the total allowances The tax schedule Tax payments in Germany are determined by a formula. The calculations are based on rounded taxable income: if taxable income cannot be dived by 54, it is rounded down to the next full DM amount which can be divided by 54. The tax formulae: X is the rounded taxable income; T is the total tax liability. In addition the following definition is included in the tax formulae: Y=(X ) / The income tax liability (T) is calculated as follows: T = 0 if X T = 0.19X if X T = (151.94Y )Y if X T = 0.53X if X T = (T-1 135)*2.5 if T > (T )*2.5 and (T ) > 0 These formulae are used directly to calculate a single person s tax liability. A solidarity surcharge of 7.5 per cent of the income tax liability is paid if the calculated income tax is higher than DM 111/122 for single/couple. 8

9 10.2 Treatment of family income Spouses are normally assessed jointly using the splitting method but have the option to separate tax assessment. To calculate income tax liability of a couple, the formulae income tax are calculated with respect to half of the joint taxable income. The resulting amount is doubled to arrive at the income tax liability of the couple (splitting method) Social security contribution schedule Employees contributions, payed on individual earnings, are: 9.3 per cent of gross earnings up to DM for the pension fund; 3.25 per cent of gross earnings up to DM for unemployment insurance; 6.85 per cent of gross earnings up to DM for sickness; 0.5 per cent of gross earnings up to DM for home care insurance. 11 Part-time work 11.1 Special benefit rules for part-time work Those working less than 18 hours per week do not qualify for unemployment insurance, or for the pension fund. People receiving UI may work up to 18 hours; beyond that, all entitlement is lost (see Section 2.2.2) Special tax and social security contribution rules for part-time work None. 12. Policy developments 12.1 Policy changes introduced in the last year A long-term care insurance (0.5 per cent of earnings up to DM ) was introduced in In 1993 unemployment replacement rates changed from 63 per cent to 68 per cent and from 60 per cent to 67 per cent for claimants without and with dependants respectively. Recent legislation changes enable unemployed lone parents to qualify for child-care benefits. The income tax system is undergoing a change reducing the tax burden on incomes below the level of social assistance (DM / for singles/married couples) to nil. This temporarily raises marginal tax rates on income levels just above the exemption level. In 1996 this transition process was ended by introducing a zero tax bracket for taxable income below DM

10 12.2 Policy changes announced in The early retirement provisions for unemployed will be phased out gradually, starting 10

11 Technical appendix: German housing benefit calculation formulae The amount of housing benefit covers the gap between the eligible rent and the amount which the household is expected to contribute toward rent. The level of the eligible rent is higher when dependants are present in the household. The household s own contribution toward rent is a function of the gross household income. steps. The calculation of the household s own contribution is complicated and involves four basic 1. The eligible rent cannot be higher than a certain family-dependent threshold value (this value is indicated as P2 and is included in the table below). Very low rents do not attract housing benefit; the threshold rent depends on the family size (P1, see table). 2. The household s own contribution toward rent is a function of income. A household with an income below a certain value (P3, see table) is not expected to contribute. A household with an income above a certain maximum level can not receive housing benefit (P4, see table). The assessable income is calculated per month for households with no members in paid employment as: 94 per cent of the gross monthly benefit income and for others as: 70 per cent x (gross monthly income - 167) where gross monthly income includes gross income from any source (e.g., earnings plus the partner s benefit income) plus child benefits. 3. The own payment cannot exceed certain maximum values which depend on the size of the households. The own-contribution threshold (TIL) is calculated as: TIL = P5 + P6 x (eligible rent - P7) (for the parameter values P5, P6 and P7, see table). 4. The calculation of the own contribution is non-linear. There are six sequential stages, which can best be described in a schematic overview. Note that the own contribution is DM 10/month if the outcome of these calculations is lower. 11

12 The housing benefit is the difference between the eligible rent and the own contribution. support value 1 (SV1) if the assessable rent is smaller than or equal to P8: SV1 equals P9 otherwise: P10 support value 2 (SV2) P11 + SV1*(eligible rent - P8) support value 3 (SV3) support value 4 (SV4) high own contribution (HOP) low own contribution (LOP) (P12 - P13)*TIL + SV2 P14 - (eligible rent)*p15 if the assessable income (step 2) is smaller than or equal to TIL: (P12*(assessable income) + SV2)*(assessable income) otherwise: (P13*(assessable income) + SV3)*(assessable income) if TIL is greater than or equal to P16: (SV4*(assessable income) + P16*(P12-SV4) + SV2)*(assessable income) otherwise: (SV4*(assessable income) + P16*(P13-SV4) + 0)*(assessable income) own contribution if assessable income exceeds P16: HOP otherwise: LOP The parameter values in the housing benefit formulae depend on the size of the household Used in code Description Values step single 1 dependant 2 dependants 1 P1 minimum rent considered P2 maximum rent considered P3 minimum income level P4 maximum income level P P P P P9 6.21E E E-4 4 P E E E-4 4 P P12 1.8E-5 4E P13 3.5E-5 2.2E5 1E-6 4 P14 1.2E E-4 6.3E-5 4 P E E P16 income threshold

13 GERMANY The annual tax/benefit position of an unemployed single person, 1995 (Deutsche marks) Unemployment insurance Unemployment assistance Social assistance A. Taxable benefits Means-tested benefits Non-means tested benefits Total taxable benefits B. Income tax and social security contributions Total income tax and social security contributions C. Non-taxable benefits Means-tested benefits Unemployment assistance Housing benefits Social assistance Non-means tested benefits Unemployment insurance Total non-taxable benefits D. Net income out of work (A-B+C) E. Net income in work F. Net replacement rate (D/E) (per cent)

14 GERMANY The annual tax/benefit position of an unemployed married couple with two children, 1995 (Deutsche marks) Unemployment insurance Unemployment assistance Social assistance A. Taxable benefits Means-tested benefits Non-means tested benefits Total taxable benefits B. Income tax and social security contributions Total income tax and social security contributions C. Non-taxable benefits Means-tested benefits Unemployment assistance Housing benefits Social assistance Family benefits * Non-means tested benefits Unemployment insurance Total non-taxable benefits D. Net income out of work (A-B+C) E. Net income in work F. Net replacement rate (D/E) (per cent)

15 GERMANY The annual tax/benefit position of an unemployed lone parent with two children, 1995 (Deutsche marks) Unemployment insurance Unemployment assistance Social assistance A. Taxable benefits Means-tested benefits Non-means tested benefits Total taxable benefits B. Income tax and social security contributions Total income tax and social security contributions C. Non-taxable benefits Means-tested benefits Unemployment assistance Housing benefits Social assistance Family benefits * Non-means tested benefits Unemployment insurance Total non-taxable benefits D. Net income out of work (A-B+C) E. Net income in work F. Net replacement rate (D/E) (per cent)